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At its party conference in Liverpool, we co-hosted a panel session to ask: "how can a Labour government ensure it invests well in public services?” Tom Rathborn shares the key takeaways from the conversation.
Contents
The Labour conference was a bit different this year. It was the first year since 2010 that speakers were talking from a position of power. In our panel session, with the Institute for Government, our speakers discussed the current state of investment, opportunities for private sector involvement, and how to ensure delivery.
Dr Gemma Tetlow, Chief Economist at the Institute for Government (chair)
The Rt Hon Darren Jones MP, Chief Secretary to the Treasury
Anita Charlesworth, Director of Research and the REAL Centre, The Health Foundation
Tom Pope, Deputy Chief Economist, the Institute for Government
Phillip Woolley, Head of Public Services Consulting, Grant Thornton UK LLP
The need for public sector investment
The panel delved into the pressing need for increased public sector investment, with a focus on the efficiency and quantity of capital spending in vital public services. Tom Pope referenced a recent report looking at how the government invests, which shed light on the challenges surrounding government investments. The report revealed a consistent underspending on capital budgets, particularly in crucial areas such as health, education, and prisons, resulting in a significant maintenance backlog that threatens service delivery.
Anita Charlesworth underscored the necessity for a progressive realignment of spending, advocating for a shift from a reactive approach focused on the costs of policy failure to proactive investment in key areas like infrastructure, digital innovation, and prevention. The panel suggested embracing a 21st-century perspective on investment, which includes a broader definition of capital and the creation of a new category of ring-fenced public spending specifically dedicated to prevention initiatives.
Taking a longer-term view
The conversation emphasised the critical need for a longer-term approach to capital spending and investment, with Tom advocating for increased capital spending and the publication of comprehensive long-term estates and equipment plans. He stressed the importance of long-term budgets to foster stability and predictability in investment planning. Anita further underscored the benefits of embracing a longer-term horizon and proposed the implementation of ring-fencing to safeguard long-term investment.
Darren Jones, Chief Secretary to the Treasury, highlighted the new Government's commitment to addressing the previous lack of investment and underspending on capital budgets. He emphasised the importance of long-term spending settlements, clear agreements on delivery and prioritisation, and the government's dedication to a 10-year infrastructure strategy. Darren also outlined the government's intention to reintroduce multiyear spending settlements to provide stability and predictability for public sector investment, with the aim of offering a clear view of future projects to the private sector and supply chain to enhance delivery.
Clear role for and appetite from the private sector
Phil Woolley expressed the keen interest of the private sector in investing in UK infrastructure and public service assets, particularly with pension funds and other investors expecting increased allocations to these areas in the future. The attractiveness of a project to private sector investors lies in its scale, stable returns, and the reliability of the Government as a partner. Moreover, he emphasised that a sustainable pipeline of projects, reliable government partnership, and de-risking of projects are crucial factors in attracting private sector investment. This involves creating an environment where private sector investors are confident in the stability and predictability of their investments.
“I think it's important that we learn the lessons from PFI… the motivation for greater private involvement in these projects shouldn't be, ‘get it off the balance sheets.’ It should be working out what's the genuine additional advantage from including the private sector in these projects,”
Darren Jones, Chief Secretary to the Treasury.
Need for pace and clarity to unlock private sector investment
Addressing the challenges identified in the recent New Hospital Programme, Phil underscored the critical need for clear political intent, emphasising that the Government must demonstrate a clear and swift willingness to move to allow private sector organisations to respond with confidence. He stressed that clarity and decisiveness at the political level are essential to foster an environment conducive to private sector investment, particularly in large-scale infrastructure projects.
Expanding on this, Anita raised the challenge posed by the absence of a clear strategy, asserting that "without a service strategy, it's pretty hard to have a capital strategy." She highlighted the importance of developing a comprehensive capital investment strategy in tandem with a workforce plan to ensure sustained productivity and longer-term investments. Anita's insights underscored the critical link between overarching service strategy and the ability to attract private sector investment, particularly in projects with significant societal impact.
Improving the system
In addressing the current challenges, Darren highlighted the entrenched detrimental habits within the system, particularly focusing on the dynamics between departments and the Treasury. He emphasised the imperative to dismantle cultural barriers and cultivate a more collaborative and supportive relationship.
He also shed light on the practice of certain departments mitigating financial risk by withholding capital funds and relying on the Treasury reserve as a financial safety net. Darren stressed the significance of departments assuming greater responsibility for managing their financial risks within allocated budgets.
The panel explored whether devolution may offer opportunities to redesign the system. Recognising the importance of local people being involved in local decision making there were a number of positives identified. However, clear that the capacity and capability within local government has been hollowed-out.
Listen to the recording
You can hear everything the panel had to say by listening on demand to the Institute for Government's audio recording of the session.
